Correlation Between PennantPark Floating and Generation Capital

Can any of the company-specific risk be diversified away by investing in both PennantPark Floating and Generation Capital at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining PennantPark Floating and Generation Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PennantPark Floating Rate and Generation Capital, you can compare the effects of market volatilities on PennantPark Floating and Generation Capital and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in PennantPark Floating with a short position of Generation Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of PennantPark Floating and Generation Capital.

Diversification Opportunities for PennantPark Floating and Generation Capital

0.92

Correlation Coefficient

PennantPark Floating  Generation Capital

Almost no diversification

The 3 months correlation between PennantPark and Generation is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding PennantPark Floating Rate and Generation Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation Capital and PennantPark Floating is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on PennantPark Floating Rate are associated (or correlated) with Generation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Capital has no effect on the direction of PennantPark Floating i.e., PennantPark Floating and Generation Capital go up and down completely randomly.

Pair Corralation between PennantPark Floating and Generation Capital

Assuming the 90 days trading horizon PennantPark Floating Rate is expected to generate 3.45 times more return on investment than Generation Capital. However, PennantPark Floating is 3.45 times more volatile than Generation Capital. It trades about 0.26 of its potential returns per unit of risk. Generation Capital is currently generating about 0.21 per unit of risk. If you would invest  1,791  in PennantPark Floating Rate on September 4, 2024 and sell it today you would earn a total of  2,382  from holding PennantPark Floating Rate or generate 133.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.83%
Values	Daily Returns

PennantPark Floating Rate  vs.  Generation Capital

PennantPark Floating Rate

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in PennantPark Floating Rate are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PennantPark Floating sustained solid returns over the last few months and may actually be approaching a breakup point.

Generation Capital

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Capital are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Generation Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PennantPark Floating and Generation Capital

The main advantage of trading using opposite PennantPark Floating and Generation Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PennantPark Floating position performs unexpectedly, Generation Capital can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Generation Capital will offset losses from the drop in Generation Capital's long position.

The idea behind PennantPark Floating Rate and Generation Capital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .